Should you take the bait on this FTSE 100 share?

Rentokil (LSE:RTO)

Rentokil (RTO) was one of our proposals for an ISA candidate in February. It’s due a bit of an update as, similar to AG Barr (BAG) (a solid 15% rise), the share price has now met and exceeded our target levels. In fact, it doubled BARR’s performance with a 30% rise.

Our last view against Rentokil proposed 316p as a major point of interest. While the share is currently trading around 312p, we’ve another demand to make on it, one which may warrant the share’s inclusion again during 2018.

Essentially, if the price now manages to actually close above 336p we can calculate the price entering a path toward 433p.

Secondary, if bettered, comes in at a less comfortable 535p which would be an all time high for the share.

Back in 1999 the price achieved 475p and common sense suggests a stumble should such a glory be revisited. After all, there’s bound to be folk trapped who shall gleefully bail in the scenario of a return to their purchase price.

On the chart below, we’ve painted a dashing red line which is currently at 198p. Realistically, Rentokil needs to break this level to cancel its long term prospects but it’s also an unpleasantly wide stop loss level.

If we attempt to refine our calculations, there’s a real danger of movement below 284p driving reversal to 242p.

This would be extremely dangerous, placing the price at risk of reversal to 197p, a number which will obviously trash the long term uptrend anytime next year.

So, if feeling brave, a stop could be emplaced around the 280 level. Or lower, if equipped with deep pockets.

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.